Using the estimated demand equation, the forecasted monthly quantity demanded for strawberries imports from January 2017 to June 2017 is, 26.75, 19.76, 18.04, 22.70, 34.02, and 22.08, respectively (see Table-3). The line graph below shows the moving direction of monthly Q for 2009, 2010, 2011, 2012, and 2017.
Since I assumed that historical trends continue in my demand forecasting, the green line plotted by connecting the Q calculated from the estimated demand equation does not fit in the trends very well. Therefore, I used a Ratio-to-Trend method to adjust the seasonal variations. Using Ratio-to-Trend forecasting (see Table-7), the forecasted monthly quantity demanded for the imports of strawberries in million pounds from January 2017 to June 2017 is 31.52, 36.55, 50.03, 49.53, 24.30, and 15.45, respectively. Below is the graph showing the adjusted trends. Sensitivity Analysis
Using Q=59.52-8.05Ps+25.27Pg-0.007I+0.20T, we can calculate the individual demand curve for each month. For example, for January 2017, the inverse demand equation is Ps=6.85-0.12Q (see Table-5). Using the same method, the demand equation for June 2017 can be calculated as Ps=5.09-0.12Q (Table-6). We can then graph the corresponded demand curves for both months (see Figure-4 and 5).
Both inverse demand curves are downward sloping, as I previously assumed. The same calculation method would give downward sloping curves for all months forecasted (see Table-8). The demand for imported strawberries obeys the law of demand. Since many substitutes for strawberries are available, consumers can easily substitute strawberries for other fruits when the price increases.
As I calculated earlier, the forecasted quantity demanded for strawberries using a ratio-...
... middle of paper ...
...ccurate. They are, however, very sensitive to scenarios described above.Conclusion
As expected, under the assumption that the time series continue to move as in the previous 9 years (2007-2016), the estimated demand for monthly strawberries imports in the first half of 2017 will be linear, and exporting countries face downward sloping demand curves. The demand displays substitution effect: U.S. consumers are price sensitive because they can easily substitute imported strawberries for domestic strawberries and other fruits. The demand is affected by income, as strawberries are normal goods: consumers will consume more strawberries when income goes up, and vice versa. This report, however, does not examine other forces such as transportation costs, international relations, weather conditions, trade barriers, etc. that might cause the observed time series to fluctuate.
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